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The 30-year fixed-rate mortgage averaged 5.20% for the week ending July 9, down from last week's 5.32% average and 6.37% a year ago.

"Interest rates for 30-year fixed-rate mortgages fell for the second week in a row to the lowest level in six weeks amid market concerns over a weakening labor market," said Frank Nothaft, Freddie Mac chief economist, in a news release.

Rates on 15-year fixed-rate mortgages also fell, averaging 4.69% for the week, down from 4.77% last week and 5.91% a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.82%, down from 4.88% last week and 5.82% a year ago. And 1-year Treasury-indexed ARMs averaged 4.82%, down from 4.94% last week and 5.17% a year ago.

To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point and the ARMs required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

Nothaft also pointed out that the employment situation and declining home values have added to greater defaults on home equity loans and lines of credit.

"The American Bankers Association reported that the number of home equity loans that were 30-days or more delinquent rose to a record high of 3.52% in the first quarter and home equity lines of credit also reached a record of 1.89%. Second liens and HELOCs totaled $1.1 trillion outstanding in the first quarter of 2009, representing nearly 10% of all home mortgage debt, according to the Federal Reserve Board," Nothaft said.

According to a separate report from the Mortgage Bankers Association on Wednesday, the volume of mortgage applications filed for the week ending July 3 rose a seasonally adjusted 10.9%, compared with the week before.